Kazamias Proposes Two-Year State Wage Freeze

Finance Minister Kikis Kazamias today bit the bullet and has proposed a two-year freeze on wages in the public sector to help reach the target of lowering the deficit to below 3 percent in 2012.

The wage freeze would avoid sanctions from the European Commission and a bailout from the EU and IMF, said Kazamias. It would also help Cyprus to gradually regain its credibility with international organisations and rating agencies, he said.

"This measure is part of a wider package of measures under consideration for fiscal adjustment in order to recover the lost credibility of the economy, and gradually be able to be able to have effective access to international markets. Otherwise, the country's accession to the EU support mechanism should be taken for granted," said the finance minister.

Expected savings are in the region of 125 million euros in 2012 and 230 million in 2013 which works out to 0.65 percent and 1.15 percent of GDP respectively.

Further measures under study will include a small raise in taxation on higher salaries in the private sector and a temporary fee on companies' turnover, said the minister. Employees with salaries between 2,500-3,500 euros would be charged an extra 0.5%; between 3,500-4,500 would be charged 1% and between 4,500 and 5,500 euros would be charged an extra 1%.

The measures will be finalised and presented in the next few days, said Kazamias.

Earlier today, political parties put their weight behind the proposals and backed the two-year wage freeze in the public sector, said a report on state radio. But political leaders remain skeptical on whether the proposals will actually turn into real measures. DISY deputy head Averoff Neophytou said that in the recent past, economic proposals fell by the wayside after trade unions put pressure on the government and stopped them in their tracks.

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